1. The petitioner herein is the Income-tax Officer, Special Investigation Circle VII, Ahmedabad, and at the relevant time he was in charge of the matter pertaining to the second respondent herein. The second respondent-firm was a registered firm for the purpose of the Income-tax Act, and it was manufacturing hosiery goods in Ahmedabad. In the course of assessment proceedings for the assessment proceedings for the assessment year 1964-65, the then Income-tax Officer noticed that the second respondent was dissolved and each of the partners had distributed amongst themselves all the assets including the machinery of the firm and this was done under the deed of dissolution dated August 31, 1964. It appears that on this machinery, development rebate had been allowed under the Indian Income-tax Act, 1922, under the provision of section 10(2)(vib), but the property was found to have been transferred by the firm to its partners before the expiry of the statutory period prescribed under the 1922 Act. The Income-tax Officer, dealing with the assessment proceedings for the year 1964-65, came to the conclusion that the development rebate should be withdrawn and accordingly, he issued a notice under section 154 of the Income-tax Act, 1961 (hereinafter referred to as "the 1961 Act"). The 2nd respondent-firm, the assessee, objected to the withdrawal of the development rebate but these objections were overruled and the Income-tax Officer passed an order purportion to have been passed under section 155 of the 1961 act, withdrawing the rebate granted for the assessment years 1960-61 and 1961-62. These order withdrawing the rebate, were passed by the Income-tax officer on November 8, 1965. Against the decision of the Income-tax Officer, the second respondent-firm filed appeals before the Appellate Assistant Commissioner, but both the appeals were dismissed by the Appellate Assistant Commissioner by his order May 4, 1967, and thus the decision of the Income-tax officer was confirmed. Against the decision of the Appellate Assistant Commissioner, the second respondent-firm filed appeals before the Income-tax Appellate Tribunal. Before the Tribunal, on behalf of the revenue, a preliminary objection was raised to the effect that though the order of the Income-tax Officer of November 8, 1965, purported to be an order under section 155 of the 1961 act, in effect and in substance, it was an order passed under section 35 of the 1922 Act, and relying upon the decision of the Supreme Court in S. Sankappa v. Income-tax Officer, Central Circle II [1968] 68 ITR 760 (SC), it was contended that for the assessment years 1960-61 and 1961-62, the returns having been filed before the commencement of the 1961 Act, the proceedings for withdrawal of development rebate were governed by section 35(11) of the 1922 Act by virtue of the provisions of section 297(2)(a) of the 1961 Act. It was further contended that under the 1922 Act, there was no provision for appeal against an order of rectification passed under section 35 of the 1922 Act, and, hence, appeal before the Appellate Assistant Commissioner against the order of the Income-tax officer was not competent and not maintainable. This preliminary objection was upheld by the Tribunal and by its order dated March 5, 1970, the Tribunal held that the appeal to the Appellate Assistant Commissioner against the order of the Income-tax Officer in the present case was incompetant and thus by this decision of March 5, 1970, the order of the Income-tax Officer was confirmed by the Tribunal.
2. The second respondent-firm applied to the Appellate Tribunal for rectification of the order dated March 5, 1970, and at the hearing of that miscellaneous application for rectification, the decision of the Supreme Court in M. M. Parikh, Income-tax Officer, Special Investigation Circle 'B' Ahmedabad v. Navanagar Transport and Industries Ltd. [1967] 63 ITR 663 (SC) was cited and the Tribunal, by its order dated August 26, 1970, made in the miscellaneous application set aside its order dated March 5, 1970, purporting to act in exercise of its powers of rectification under section 234, sub-section (2), of the 1961 Act and directed that the appeals of the second respondent-firm should be heard afresh. It is this order of the Appellate Tribunal of August 26, 1970, which has been challenged by the petitioner in this special civil application. This petition has been filed under articles 226 and 227 of the Constitution of India and the main contention on behalf of the petitioner is that the Tribunal had no jurisdiction to rectify the order as it purported to do.
3. On behalf of the second respondent-firm two preliminary objections have been urged. It was first contended that the alternative remedy by way of a reference against the order of the Tribunal rectifying its earlier order being the order of rectification dated August 26, 1970, is available to the department according to law and, therefore, this extraordinary remedy under articles 226 and 227 of the Constitution should not be allowed to be availed of by the department. This preliminary objection must be rejected because it is well-stated law that when a particular Tribunal has acted without jurisdiction, the question of alternative remedy does not arise and if the High Court, while exercising powers under articles 226 and 227 finds that the Tribunal did exercise its powers, though it had no jurisdiction to do so, the order of the Tribunal in question will be quashed and set aside and the question of alternative remedy in such a case does not arise. This well-settled position in law arise from the fact that an order passed without jurisdiction is non est.
4. It was further contended on behalf of the second respondent-firm by Mr. Pathak that there has been delay and laches on the part of the revenue in approaching this court by this special civil application. Mr. Pathak contended that on August 26, 1970, the Tribunal passed the order of rectification which is being challenged in these proceedings. Thereafter, the reference application which had been filed by the second respondent-firm against the order of March 5, 1970, asking for a reference on a point of law to this High Court were withdrawn by the second respondent-firm on September 18, 1970, and on December 17, 1970, the present special civil application was filed by the revenue. Mr. Pathak also contended in this connection that by this delay of nearly three months and 21 days in approaching this High Court, the revenue has rendered it impossible for the 2nd respondent-firm to approach the Tribunal for reference applications against the order of March 5, 1970. Now, as long as the order of August 26, 1970, stands and has not been set aside by the High Court in exercise of its power under articles 226 and 227 of the Constitution, there is no question of any reference application having to be made or any reference having to be sought by the second respondent-firm. It is only if the present special civil application succeeds and the order of March 5, 1970, is restored that the question of any reference application in connection with the order of March 5, 1970, would arise. In our opinion, it cannot be said, as has been urged by Mr. Pathak at the time of the hearing before us and as had been urged in the affidavit-in-reply on behalf of the 2nd respondent-firm that the time between August 26, 1970, when the order of rectification was passed by the Tribunal and December 17, 1970, when the present special civil application was filed, was deliberately allowed by the revenue to elapse so that it might not be possible for the second respondent-firm to adopt proceedings seeking reference on a question of law to this High Court. In our opinion, since the order of August 26, 1970, was in favour of the second respondent-firm, there was no question of that firm seeking any reference to this High Court and, hence, there was no question of the second respondent-firm being prejudiced in any manner by reason of the fact that the special civil application came to be filed on December 17, 1970. On the facts of this case, it cannot be said that there has been such delay or laches on the part of the revenue as would disentitle the petitioner to get the relief that he seeks at the hands of this court.
5. Coming now to the merits of the case, we may point out that in passing the order of August 26, 1970, the Tribunal has relied upon the decision of the Supreme Court in M. M. Parikh, Income-tax Officer v. Navanagar Transport and Industries [1967] 63 ITR 663 (SC). The relevant passage on which the Tribunal relied occurs at page 670 of the report. From the bottom of page 669 in this case, the Supreme Court was considering whether order under different sections of the 1922 Act were assessment orders or whether they were orders passed in the course of assessment proceedings. At page 670 Shah J. (as he then was), delivering the judgment of the Supreme Court, has observed :
"Again by section 35(11) as added by the
Finance Act of 1958, development rebate in respect of a ship, machinery or plant under section 10(2)(vib) could be deemed to have been wrongly allowed if the ship, machinery or plant was sold or otherwise transferred, or the amount credited to the reserve account under that clause was diverted for another purpose within ten years, and the Income-tax Officer had to recompute the income, and levy tax on the footing of such recomputed income. In each of these cases there is computation of income, determination of tax payable and procedure is prescribed for imposing liability upon the taxpayer. But still these are not orders of assessment within the meaning of section 23. The salient feature of these and other orders is that the liability to pay tax arises not from the charge created by statute, but from the order of the Income-tax Officer."
6. These observations in M. M. Parikh, Income-tax Officer v. Navanagar Transport and Industries [1967] 63 ITR 663 (SC) were considered by the Supreme Court in S. Sankappa v. Income-tax Officer, Central Circle II [1968] 68 ITR 760 (SC). At page 764 of the report Bhargava J., delivering the judgment of the Supreme Court, has observed :
"It is clear that, when proceedings are taken for rectification of assessment to tax either under section 35(1) or section 35(5) of the Act of 1922, those proceedings must be held to be proceedings for assessment. In proceeding under those provisions, what the Income-tax Officer does is to correct errors in, or rectify orders of assessment made by him, and order making such corrections or rectifications are, therefore, clearly part of the proceedings for assessment."
7. Bhargava J. has pointed out immediately after the above passage that the mainstay of the argument of learned counsel for the appellants in that particular case before the Supreme Court was that the decision in M. M. Parikh, Income-tax Officer v. Navanagar Transport and Industries [1967] 63 ITR 663 (SC) in which case the court was dealing with the question whether an order imposing additional super-tax under section 23A of the Act of 1922 was an order of assessment and held to the contrary, then the observation proceeds (page 764) :
"The decision in that case does not, in our opinion, support the submission made on behalf of the appellants in the present cases. It was explained there that, under section 23A of the Act of 1922, there was no computation of income or determination of tax imposed by the charging section. That section by itself empowered the Income-tax Officer to impose the super-tax by his own order, and an order imposing such a tax could not be held to be an order of assessment."
8. In S. Sankappa's case [1968] 68 ITR 760 (SC), Bhargava J. has pointed out that in the context of section 297(2)(a) of the Act of 1961 the main question which the court or the appropriate authority has to consider is whether the subsequent proceedings are proceedings for the assessment of the assessee concerned. The exact words used are,
"proceedings for the assessment of that person for that year may be taken and continued as if this Act had not been passed"
, and under
section 297(2)(a), notwithstanding the repeal of the
Indian Income-tax Act, 1922, where a return of income has been filed before the commencement of the Act of 1961 by any person for any assessment year, proceedings for the assessment of that person for that year may be taken and continued as if the Act of 1961 had not been passed. At page 767 in S. Sankappa's case [
1968] 68 ITR 760 (SC) it is observed :
"Consequently, when the Income-tax officer passed the orders dated 20th December, 1966, and apportioned that income of the firms between the various partners, the order which he made were clearly orders in proceedings for assessment and it was in order to give effect to these orders in the individual assessment of the partners that the impugned notices were issued."
In S. Sankappa's case [1968] 68 ITR 760 (SC) it has been held in terms (page 764) :
"... proceedings taken for rectification of assessment to tax, either under section 35(1) or under
section 35(5) of the 1922 Act, were proceedings for assessment. The orders passed by the Income-tax Officer under section 35(1) rectifying the firm's assessments were all orders altering assessment order made in proceedings for assessment of the firms, and under the notices the Income-tax Officer was proposing to rectify order made for computation of income and imposition of tax under the charging section in the case of individual partners.
section 297(2)(a) of the Act of 1961, therefore, applied, and permitted the Income-tax Officer to proceed in accordance with the provisions of the Act of 1922 and action could be taken under section 35(5) of the Act of 1922 on the basis of the rectification made in the assessments of the firms under section 35(1)."
9. We may point out that under section 35 of the Act of 1922 provision was made for rectification of mistake apparent from the record and under sub-section (1), it was open to the Income-tax Officer to rectify any mistake apparent from the record within four years from the date of the assessment order. Under sub-section (11) of section 35 :
"Where an allowance by way of development rebate has been made wholly or partly to an assessee in respect of a ship, machinery or plant in any year of assessment under clause (vib) of sub-section (2) of section 10, and subsequently at any time before the expiry of ten years from the end of the year in which the ship was acquired or the machinery or plant was installed -
(i) the ship, machinery or plant is sold or otherwise transferred by the assessee to any person other than the Government or for any consideration not connected with any amalgamation or succession referred to in clause (vib) of sub-section (2) of section 10; or
(ii) the assessee utilises the amount credited to the reserve account under that clause -
(a) for distribution by way of dividends or profits; or
(b) for remittance outside India as purpose or for the creation of any asset outside India; or
(c) for any other purpose which is not a purpose of the business of the undertaking :
the development rebate originally allowed shall be deemed to have been wrongly allowed, and the Income-tax Officer may, notwithstanding anything contained in this Act, proceed to recompute the total income of the assessee for the relevant year as if the recomputation is a rectification of a mistake apparent from the record within the meaning of this section and the provisions of sub-section (1) shall apply accordingly, the period of four years specified therein being reckoned from the end of the year in which the transfer takes place or the money is so utilised."
10. It is, therefore, clear that by the fiction set out in the last portion of section 35(11) recomputation of total income of the assessee for the relevant year in view of the transfer of the machinery, ship or plant in respect of which development rebate has been allowed in the past within the statutory period of 10 years from the end of the year in which the ship was acquired or the machinery or plant was installed amounts to an order of rectification under section 35(1), and such recomputation is permissible within a period of four years from the end of the year in which the ship, machinery or plant was transferred or the money from the reserve account is utilised as shown in clauses (a), (b) and (c) of clause (11) of section 35(11). Therefore, by this fiction, the order under section 35(11) of recomputation of income is deemed to be a rectification of mistake within the meaning of section 35(1). In view of this fiction to which effect must be given, it is obvious that the order passed by the Income-tax Officer dated November 8, 1965, must be deemed to be an order of rectification of mistake under section 35(1) of the Act of 1922.
11. Mr. Pathak for the assessee contended before us that section 35(3)(b) of the Act of 1961 is attracted to the facts of this case and, therefore, the order passed by the Income-tax Officer after the commencement of the Act of 1961 must be deemed to have been made section 155 of the Act of 1961. Under section 34(3) if any ship, machinery or plant is sold or otherwise transferred by the assessee to any person at any time before the expiry of eight years from the end of the previous year in which it was acquired or installed, any allowance made under section 33 or under the corresponding provisions of the Act of 1922, in respect of machinery, plant or ship, shall be deemed to have been wrongly made for the purposes of the Act of 1961, and the provisions of sub-section (5) of section 155 shall apply accordingly. Mr. Pathak contended that in view of section 34(3)(b) the order passed by the Income-tax Officer on November 8, 1965, must be deemed to have been an order passed under section 155 of the Act of 1961. In view of the decision of the Supreme Court in S.Sankappa's case [1968] 68 ITR 760 (SC), it is not possible for us to accept this contention of Mr. Pathak. So long as the return of income was filed before April 1, 1962, i.e., before the commencement of Act of 1961, proceedings for assessment of this particular assessee in connection with that return may be taken and continued as if the Act of 1961 had not been passed. The decision of the Supreme Court in S.Sankappa's case [1968] 68 ITR 760 (SC) laid down that proceedings under section 35 of the Act of 1922, being proceedings for assessment, section 297(2)(a) of the Act of 1961 applies and, therefore, the recomputation of development rebate in the light of the transfer of machinery or ship or plant must be done in accordance with section 35(1) of the Act of 1922. In view of the decision of the Supreme Court in S.Sankappa's case [1968] 68 ITR 760 (SC), no other conclusion is possible and section 34(3)(b) can only be attracted and in the light of the principle of harmonious interpretation it must be held that provisions of section 297(2)(b) are attracted only if the Act of 1922 is applicable and not otherwise. In the present case, in view of section 297(2)(a) as interpreted by the Supreme Court in S.Sankappa's case [1968] 68 ITR 760 (SC), we must be proceed on the footing that provisions of section 155 of the 1961 Act including provisions of section 34(3)(b) of that Act do not apply to this case.
12. A Division Bench of this court in Mandal Ginning and Pressing Co. Ltd. v. Commissioner of Income-tax [1973] 90 ITR 332 (Guj) has held that an assessee had no right to appeal under section 30(1) of the Act of 1922 , against an order of rectification made under section 35(1) Act. In view of this decision of this court, it is obvious that the assessee had no right of appeal before the Appellate Assistant Commissioner was not competent and, therefore, it was rightly held by the Tribunal by its order dated March 5, 1970, that the appeal before the Appellate Assistant Commissioner was not competent.
13. The question has also to be considered since this is a petition filed under articles 226 and 227 of the Constitution, from the point of view of the jurisdiction of the Tribunal. Under section 254, subsection (2), of the 1961 Act, the Appellate Tribunal may, at any time within four years from the date of its order, with a view to rectifying any mistake apparent from the record, amend any order passed by it under sub-section (1), and shall make such amendment if the mistake is brought to its notice by the assessee or the Income-tax Officer. Thus, the jurisdiction of the Tribunal to pass an order of rectification is conferred upon it by section 254(2) only for the purpose of rectifying any mistake apparent from the record. We may also point out that under the Act of 1922, by virtue of section 254, the provisions of section 35 were to apply in like manner to the rectification of mistake by the Appellate Tribunal and, therefore, under the Act of 1922, also, the Tribunal can rectify any mistake apparent from the record. The scope of the power of rectification has been explained by the Supreme Court in T. S. Balaram, Income-tax Officer v. Volkart Brothers [1971] 82 ITR 50 (SC), and the Supreme Court has there held that a mistake apparent on the record must be an obvious and patent mistake and something which can be established by a long drawn process of reasoning on points on which there may be conceivably two opinions, and a decision on a debatable point of law is not a mistake apparent from the record. Thus, it is obvious that the Appellate Tribunal in the instant case, when it passed the order of August 26, 1970, in rectification proceedings was comparing and contrasting the decision in S.Sankappa's case [1968] 68 ITR 760 (SC) with the decision in M. M. Parikh, Income-tax Officer v. Navanagar Transport and Industries Ltd. [1967] 63 ITR 663 (SC), and the Tribunal has in terms observed in its order of August 26, 1970, that it was in the light of the decision of the Supreme Court in Navanagar Transport and Industries Ltd.'s case [1967] 63 ITR 663 (SC), that it proceeded to rectify it mistake. To say the least this was a debatable point of law and a decision on a debatable point of law cannot be said to be a mistake apparent from the record. In the instant case, there cannot be said to be a mistake, much less a mistake apparent from the record. In my opinion, in view of S.Sankappa's case [1968] 68 ITR 760 (SC), in the first place there was no mistake when the Tribunal passed the order of March 5, 1970, much less was there a mistake apparent from the record. Under these circumstances, it is obvious that the Tribunal was in error when it held that there was mistake apparent from the record and thereafter proceeded by its order of 26th August, 1970, to rectify the order of March 5, 1970.
14. We, therefore, allow the special civil application and quash and set aside the order passed by the Tribunal on August 26, 1970, a copy of which has been annexed as annexure "B" to the petition. The result of setting aside the order of August 26, 1970, is that the order of March 5, 1970, is automatically restored. Rule is, therefore, made absolute. The second respondent will pay the costs of this special civil application to the petitioner.